Doka La standoff ends: Four good economic reasons China had to not mess with India

What really caused a sudden end to the Doka La standoff between India and China is as yet unclear. Until recently, the situation wasn’t getting any better with the war of words escalating on both sides, reminders of the 1962 war and highly provocative, sometimes misleading reportage in the media.

The important takeaway from the decision is that it saves both sides from major economic consequences. More importantly, it averted an embarrassment for China in the BRICS Summit that begins on 3 September in Xiamen. While the exact reasons for the end of the standoff are not known, there are a few clear reasons why China could not have afforded a prolonged standoff at the Sikkim border and eventually turned India into an enemy.

Narendra Modi and Xi Jinping are set to meet at next month's BRICS Summit. PTI

First, India plays an important role in emerging economies off the world. Among the BRICS (Brazil, Russia, India, China and South Africa) nations, undoubtedly India is seen as a major emerging economic power that has strong enough pillars to challenge the dominance of China in the decades to come. Even today, India plays a key role in the Asian economy, as the third largest in the region. In this backdrop, as the host, China could not have afforded facing India at the meet to discuss economic cooperation of BRICS countries when troops from both countries are positioned against each other in a high-tension scenario.

Besides, India’s emerging economic dominance in the region would make any country seek to befriend it, particularly China which wants to play the role of big brother in Asia. A recent Harvard study said that India has emerged as the economic pole of global growth by surpassing China and is expected to maintain its lead over the coming decade citing that it is particularly well-positioned to continue diversifying in new areas, given the capabilities accumulated to date. Further, according to Harvard University’s Centre for International Development (CID) growth projections, India will feature on top of the list of fastest growing economies till 2025 with an average annual growth of 7.7 percent.

Second, India now has much better diplomatic relations with world powers, mainly the US, which China cannot ignore any longer. If China escalates tensions with India and makes an enemy of its neighbour, it would naturally put China in the opposite camp and will erode the gains it has been making as a peace-loving, mature country that aspires to become a world leader. Beijing wouldn’t have wanted to gamble its hard-won image by prolonging the military standoff with India at a disputed territory.

Third, China will also suffer on the trade front if it cuts ties with India. It has more to lose than India as China traditionally has a trade surplus with India. Right now, India has a trade deficit of around $52 billion with China. In the past year alone, India exported around $9 billion worth of goods to China while China exported $60 billion to India. That’s a big trade opportunity for Chinese manufacturers. It wouldn’t be wrong to say that the Chinese presence is evident in almost all sectors ranging from electronic items to pharmaceutical products. Here too, China would have taken a heavy hit if tensions escalated to a war-like situation.

Fourth and perhaps the biggest reason China wouldn’t want to create an enemy of India would have been its One Belt, One Road initiative and the China-Pakistan Economic corridor, where significant investments have already been made, and both are critical to China’s long-term plan to build its dominance in the Asian region. China has invested at least $50 billion so far in CPEC. India has a problem with CPEC as the corridor passes through the contentious part of Kashmir, which is occupied by Pakistan and claimed by India.

Some of its neighbours like Sri Lanka too have spoken in favour of India on this issue saying it is difficult for India to accept the CPEC since it passes through the 'heart of Indian interests'. China would have further risked the fate of CPEC and OBOR if it escalated tensions, as India can create hurdles in the path of OBOR.

As Dhruva Jaishankar, fellow of foreign policy with Brookings India in New Delhi writes in this NDTV article, "Dok(a La) shows that a military confrontation between two nuclear-armed powers can be resolved diplomatically, and without escalation. But for China's leadership there is perhaps a need for introspection about why it let relations with India deteriorate so sharply for no material gain."

To sum up, calling off the military standoff in Doka La was a big face-saving exercise for both India and China also due to major economic reasons. But, for China, Doka La offers a bigger lesson not to mess with India. And Beijing has learned it well.